Looking for the benefit from Connecticut's paid sick day mandate

Published 4:44 pm, Wednesday, February 6, 2013

With news of a flu epidemic still making headlines, Connecticut's first-in-the-nation law requiring certain employers to provide paid sick days seems downright prescient.

But today, one year after that law took effect, new evidence suggests that it hasn't been the cost-free endeavor advocates claimed. A study from Employment Policies Institute (EPI) finds that businesses in the state have taken labor-saving steps to adapt to the law's costs--with consequences for employers and employees both.

During the contentious public debate over the sick leave bill, employers warned that the additional cost of the mandate could force unintended consequences. Not long after the bill was signed, for instance, an article in the Connecticut Post documented a business that had downsized by converting part-time employees to full-timers in an attempt to circumvent its 50-employee threshold.

To more fully capture these responses to the law, EPI began surveying employers in April 2012, with technical assistance from the state business and restaurant associations. We received responses from 156 businesses, 86 of which had started providing sick leave to comply with the law.

Some of these employers took steps to reduce costs prior to the law taking effect. For instance, 31 businesses scaled back on employee benefits or other forms of paid leave. Nineteen businesses raised their prices, six cut employee wages, and another six reduced their work force. Sixteen businesses decided to limit expansion within the state.

Perhaps more concerning were businesses' future plans: Thirty-eight said they were likely or highly likely to hire fewer people in the future as a direct result of the law. The same number said their employees would pay more for their health insurance -- again, as a direct consequence of the sick leave mandate. Thirty-five employers planned to offer fewer raises, and 32 planned to raise prices on their products.

Contrary to the claim of the law's proponents, who had said the mandate would save state employers $27 million in aggregate, 42 companies said the law was likely to reduce their profits.

That original cost-savings analysis, published by sick leave advocates at the George Washington University-based Institute for Women's Policy Research, based the bulk of its projected savings on reduced turnover in the workplace. The authors assumed that Connecticut employees would be less likely to leave their current job if there was a sick day benefit to keep them around.

This assumption was never particularly sound: Employers in San Francisco reported no drop in turnover following passage of that city's law, after all. (One employer in that city pointed out that there's no incentive to stay with one business over another if everyone offers the benefit.) So it's not surprising that just two of the surveyed employers in Connecticut anticipated that the law would reduce employee turnover.

By contrast, 46 businesses worried that the law would increase unscheduled absences in the workplace. Case in point: One of the company executives commented that they had already experienced the "miraculous recovery" that employees would have on Tuesday after taking Monday off.

Nearly 90 percent of all responding businesses said that having sick employees in the workplace was not a serious problem prior to the law taking effect. It's a response that runs counter to the employer vs. employee narrative that dominated the campaign to pass the legislation, when the law's proponents claimed that employees were forced to choose between their jobs and their health. Disputing this caricature, one employer explained: "Everybody's happy -- some of my employees have been here 20, 25 years. If things were so terrible, I wouldn't have that kind of longevity." This survey isn't representative of all employers in the state, and further analysis using government data will be necessary to deliver a final verdict on Connecticut's policy experiment. But this early account of the law's consequences suggests that the "Everybody Benefits" tagline used by advocates of the sick leave mandate was missing a word. "Not Everybody Benefits" would be more accurate.

Michael Saltsman is research director at the Employment Policies Institute, based in Washington, D.C.